You need to know what kind of business you are running
Before any business directors can create a strategy and take the first steps to achieving it, they have to know which one of two types of firm they are running. Without that clarity they cannot run any operation effectively, argues Michelle Hoskin of Standards International
The nature of the financial advice market is that many advisory firms started as one- and two-man bands and have grown or developed from there. This has meant that often as the firm has evolved the nature of the business has become confused, says Michelle Hoskin, managing director of Standards International. “Where that happens, firms can have an identity crisis which makes it difficult to plan a strategy and ultimately, to run a business effectively,” she adds.
“When I travel around the country, what I’m seeing is that the market has polarised into two different types of firm – lifestyle firms and businesses. Before any business directors can create a strategy and take the first steps to achieving it, they have to know which one of those two types of firm they are running – because the way that they then develop their strategy will be different for each,” Hoskin says.
Asked to differentiate between the two types, Hoskin describes a lifestyle firm as “one where you are personally making decisions on behalf of the business that suit your lifestyle – for example, weighing up whether to do another seminar or use the money to help buy a new car; or making the decision not to grow the business any further in order to enjoy more time off.”
A business, she describes as “where decisions are being made to benefit the business as an entity.”
A useful indicator of the business type is the language used to talk about it, Hoskin adds: “A lifestyle firm is all about I, My and Me. A business is about We, Us and Our. It’s totally different terminology.”
“If business owners don’t have that conversation with themselves both the firms and the people within it will suffer a massive identity crisis. It’s ok to be one or the other. There are very well run, very profitable lifestyle businesses – but they know they are a lifestyle business.”
Where problems occur, she says, is when owners make decisions like a lifestyle firm but expect their teams to work like a business. “Then you have a massive conflict. But once people know which type of business they are running, everything becomes clear.”
As an example, she says: “In a lifestyle business it’s the business owner’s standards that everyone has to follow. They are the boss, they say what goes and they have full rein over what happens. Everyone follows their lead. I’ve been into businesses where there are three or four board directors who think they are running a business, but they are making decisions about the business to suit their lifestyle. As a result they don’t know how to take the business forward – and they are not going to be able to progress with that kind of conflict going on.
“But in a business, your personal standards are almost secondary – what you do is bring the standards of the whole business together and say, ‘this is how we do it here’; not how I do it – but how we do it.
“That simple conversation changes everything. It changes the kind of people you need around you, how you write your processes and procedures, how you plan for the future – everything.
“You’ve got to establish what you want the business to be. Then once you’ve identified which type of business you want to run, you can put in place the processes, procedures and strategies for the future – because they will suit that business. It will enable you to predict what you will be doing and where the business will be in one, three and five years down the line. And, importantly, all of that starts at the top.”
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